Public vs. private

A private-college education costs four times more than an education at a public university. Is an Ivy League education better than a degree from State U.?

The debate rages on over whether an education at an elite school translates into higher lifetime earnings. Some studies have claimed that the cost of a highly selective and challenging school is justified by higher earnings. Others have found flaws in those studies' methodology. (Academic debate -- don't you love it?)

One of the best studies looked at students who were accepted at prestigious schools but chose to go somewhere else (so the study was looking at students with the same qualifications). The choice of school didn't affect earnings at all except for those at the low end of the income scale. Students from lower-income families saw a small increase in lifetime earnings if they attended the more prestigious school, presumably because of better social networking opportunities. For most students, however, there was no difference.

An interesting exercise is to have your child interview five to 10 adults he or she admires, asking where they went to college, and how they think their college choice made a difference in their careers.

If the fruit of your loins has a career firmly in mind, then perhaps he or she should first consider the top schools in that field. In many cases, the best schools are public schools. If you can get the best training for a public-college price, what a deal!

By Robert Brokamp

You're not going to like what you're about to read, but you probably suspect as much. You probably have a sense of looming unpleasantness, the kind of feeling you get right before you open a container of leftovers that has been in the fridge for a few months. But it's time to face reality, Fool. So let's just get this out of the way:

A college education is very, very expensive!

Here's the naked-as-what's-beneath-a-toga truth: According to the College Board (yes, the SAT people), the average tuition costs for the 2001-2002 school year were $3,754 for a public four-year college and $17,123 for a private four-year college. Those price tags are up 7.7% and 5.5%, respectively, from the previous year, which demonstrates an enduring and frustrating aspect of college costs: They have risen at a rate that has far outpaced inflation.

Add in room and board and other expenses and those annual average costs jumped to $11,976 for a public school and $26,070 for a private school. That's just for one year, folks. By the time Junior earns a degree, the total will be more than four times those amounts (or seven times those amounts, depending on how often your little princess changes majors).

But don't despair! There is (relatively) good news. Consider these stats about the 2001-2002 academic year(also from the College Board):

More than 40% of students attending a four-year college paid less than $4,000 in tuition and fees.

Almost 70% of students attending a four-year college paid less than $8,000 in tuition and fees.

Only 6% of students attended schools that charge $24,000 or more for tuition.

Embedded in those stats is an important lesson: There's a big difference between the price tag of a college education and what people actually pay.

A lot can be done to keep college costs under control, from choosing a reasonably priced school to grabbing a piece of the annual $74.4 billion financial aid pie.

So buck up! Here in the hallowed halls of this Motley classroom, we'll show how much you need to save, the best ways to save, and a backpack full of other tips and tricks that will (hopefully) save you from mortgaging the house or taking on a mortgage-sized school loan.

So how much will it really cost?

Time to crunch some numbers. Saving for college is like saving for any other big expense (or at least like any expense where you work long hours to afford it just to watch your kids take it for granted).

Follow these steps to determine a monthly amount you should sock away to make sure your offspring will have enough to attend the best schools, thus increasing their chances of getting plumb jobs, earning big bucks, and paying for your retirement.

Step 1: Pop open the aptly titled, "What will it take to save for a college education?" online calculator.

Step 2: Fill in the blanks, considering our suggestions below:

Tuition and Expenses in Today's DollarsIf you're confident that your young'un is heading for a public institution, then use the current average costs for a state school ($3,754 for tuition only, $11,976 including room and board). If you're shooting for a private school, use the average costs ($17,123 for tuition only, $26,070 including room and board). However, if you're not sure, try some in-the-middle numbers ($8,000 for tuition only, $16,000 including room and board).

Years of CollegeDo you want to cover the expenses for an associate's degree (two years), bachelor's degree (four years), master's degree (two to three years), or doctorate (get a job already!)?

Years Until CollegeSince most students go straight from high school to college, subtract your child's age from 18 and you have how many years until the nest is empty.

College Savings to DateIs there anything in the college kitty already?

Monthly Amount You Can SaveJust take a guess -- you can fiddle with this later to see if you need to save more or less.

Estimated Rate of Return on InvestmentsWhat kind of growth do you expect from your investments? Keep in mind that, as your child nears college enrollment, you should be investing more conservatively. If you're not sure what to input here, try a number between 6% and 8%.

Estimated Inflation RateSince 1971, college costs have grown an average of 7.7% a year. However, that figure includes the high-inflation '70s and early '80s. For this variable, you might choose a smaller number -- perhaps 6%.

Your Federal Tax Rate and Your State Tax RateThese are important only if you are saving for college through a regular bank or brokerage account, and not through a tax-advantaged Coverdell Education Savings Account or 529 plan (topics we'll cover later). If you're not sure, just leave these inputs blank.

Step 3: Click "Results." You will be provided an estimate of how much a college education will cost per year and in total, based on the information you entered. You will also be given a few other estimates:

How much you should invest right now to meet your goal. The number suggested is the total amount to invest right now, not in addition to whatever you put in previously. Also, this is in addition to -- and does not replace -- the monthly savings amount you entered.

How much you should save monthly to meet your goal.

How much you should earn on your investments to meet your goal. While this can be a somewhat useful indicator of whether you're being too conservative or aggressive with your investments, take the number with a shaker of salt. If it says you should earn 25% on your investments (an ambitious goal), the REAL solution is to save more money.

(We'll pause a moment so you can recover from the higher-ed sticker shock.)

Step 4: Begin determining whether your budget can accommodate the requisite savings suggested by the calculator. In the meantime, continue on to the other classrooms of our College Savings Center. We'll discuss the ways you can accumulate college coinage (a choice that will also affect the amount you ultimately have to save).

Don't get scared out of saving

Some people, when they see such astronomical price tags attached to a college degree, do something extraordinary: They do nothing. They figure there's no way to save that much without shortchanging other goals, so they cross their fingers and hope their little Einstein will win large scholarships or join an anti-education cult.

Don't fall for this trap. If you start soon enough, you can have a large chunk of higher-education money when your pride and joy is ready to enroll in P.U. If as soon as their kid is born, a couple invests $100 a month and earns 8% per year, they'd have almost $50,000 in 18 years (assuming they utilize a tax-friendly savings vehicle, which we'll discuss presently). That's $50,000 less that you or your kid will have to borrow.

Even if your pride and joy is in high school and you haven't saved a dime, don't give up. Whatever you do... do whatever you can. Really, every little bit helps.